Employers may force employees not to file class actions

nlrb.jpgAs my buddy Rubo used to say: “It’s like school on Saturday; no class.”

Read all about it — yesterday’s BIG federal appellate court decision; not my buddy — after the jump…

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Back on January 3, 2012, in this opinion, the National Labor Relations Board held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that deprived employees of three rights:

First, the agreement provides that Horton and its employees “voluntarily waive all rights to trial in court before a judge or jury on all claims between them.” Second, having waived their rights to a judicial proceeding, Horton and its employees agreed that “all disputes and claims” would “be determined exclusively by final and binding arbitration,” including claims for “wages, benefits, or other compensation.” Third, Horton and its employees agreed that “the arbitrator [would] not have the authority to consolidate the claims of other employees” and would “not have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.”

The last provision, the one about class or collective actions is the one we’ll focus on here.

The Board concluded that this provision chilled and interfered with the rights of employees to discuss workplace conditions with one another in an effort to improve them. The Fifth Circuit Court of Appeals, in this opinion issued yesterday, said, “Well, yeah, the National Labor Relations Act gives employees certain rights, but don’t forget about the Federal Arbitration Act, yo.”

(That’s not at all what the Fifth Circuit said; although if you read the opinion backwards and upside down, it does say “#YOLO” — hashtag and all).

Well, actually, the Fifth Circuit said this:

“The NLRA should not be understood to contain a congressional command overriding application of the FAA…Because the Board’s interpretation does not fall within the FAA’s “saving clause,” and because the NLRA does not contain a congressional command exempting the statute from application of the FAA, the Mutual Arbitration Agreement must be enforced according to its terms….The issue here is narrow: do the rights of collective action embodied in this labor statute make it distinguishable from cases which hold that arbitration must be individual arbitration? We have explained the general reasoning that indicates the answer is ‘no.'”

This decision is in line with other appellate courts, which have uniformly suggested or expressly stated that arbitration agreements containing class waivers are enforceable.

So, unionized workplace or not, if you want your employees to waive their rights to be able to assert a collective or class action, talk to a lawyer about preparing an agreement for them to sign. A word of caution, however. As Ronald Meisburg, former General Counsel to the Board, writes on the Labor Relations Update blog, “the Board and the NLRB General Counsel will very likely continue to apply the Board’s decision in D.R. Horton.”

  • Susan Fentin

    We just heard a presentation from Region I NLRB Director Jonathan Kriesberg, who noted this decision but also said that under established Board protocol, the Board will only apply a federal court decision to the specific case where the decision originated. So don’t look for the NLRB to be following the Fifth Circuit on this issue any time soon.